Last year was one of massive and sometimes controversial change, for broad based black economic empowerment (BBBEE). The amended BBBEE scorecard, gazetted in October 2013, came into effect in 2015 and will affect all companies who are being measured and verified based on a financial period ending after 30 April 2015.
“For some companies, this means you may still have one more financial period under which you can be measured for the Old Codes, however, many will need to ensure they have addressed the requirements of the Amended Codes, to avoid being non-compliant”, explains Jenni Lawrence, Managing Director of Grant Thornton Verification Services, in this month SmartProcurement.
Do you qualify at the same level?
For some entities the new thresholds will make compliance easier. Under the amended codes, the annual total revenue threshold for Exempt Micro Enterprises (EMEs) has increased from R5-million to R10-million, and a Qualifying Small Enterprise (QSE) qualifies within the R10- to R50-million bracket. Generic companies are those with a turnover exceeding R50-million. EMEs (including start-ups) and QSEs could qualify for higher BBBEE status levels, depending on their black ownership:
• An EME or QSE with 100% black ownership qualifies at a Level One.
• An EME or QSE with more than 51% black ownership qualifies at a Level Two.
• If black ownership of an EME is below 51%, it qualifies at a Level Four.
• If black ownership of a QSE is below 51%, it is required to be measured in terms of the QSE scorecard to confirm its BBBEE status level.
What has changed?
“February sees their financial year end for many businesses, which means only a few weeks remain to ensure you affect any changes or spend required, in order to ensure you meet your targets”, says Lawrence.
Furthermore, it is important to remember that ownership, skills development and enterprise and supplier development are now all priority elements, with a subminimum achievement of 40% required on each. Failure to meet all three of these means a level drop for Generics. For QSEs, ownership plus either skills development or enterprise & supplier development points must reach the subminimum in order to avoid their scorecards dropping one level.
Ownership and management control/employment equity are measured based on the date of verification, with the balance of the elements (skills development, enterprise & supplier development and socio economic development) being measured based on your activities during the financial period being verified.
The points you need to achieve have increased and the difficulty and technicality of the elements have increased.
What do I need to do?
Ownership and management control/employment equity cannot be changed overnight, however, EE reporting must have been completed if you are a designated employer or no points will be awarded.
The areas where you can affect fairly immediate changes are the following:
1. Skills Development – 20-25 points
The spend target has doubled to 6% of the salary/wages bill, and can include people other than employees. For Generics, there are specific targets per sub-race and gender group. For QSEs, the spend target is 3% of the salary/wages bill. Ask your verification agency or consultant to confirm your targets if you are unsure.
In order to score any points under skills development, training in priority skills for black people must be evident.
The following must be submitted to your SETA for approval for both QSE and Generic entities:
• workplace skills plan
• annual training report
• pivotal report
2. Enterprise development – 5 points
1% net profit after tax (NPAT) to be spent on more-than-51% black-owned companies with a turnover under R50-million, in order to increase their financial or operational capacity.
3. Supplier development – 10 points
For QSEs 1% NPAT and for Generics 2% NPAT to be spent on more-than-51% black-owned companies (who are suppliers) with a turnover under R50-million, in order to increase their financial or operational capacity.
4. Socio economic development – 5 points
1% NPAT to be spent on qualifying beneficiaries and activities.
Who can help me?
Grant Thornton has worked with a number of service providers in the BBEEE field and can recommend companies who may be able to assist, on request.
For more information contact Jenni Lawrence on Jenni.firstname.lastname@example.org